Japanese stock market inflation induced rally likely nearing an end.

Japanese Prime Minister Abe got rid of the more conservative Bank of Japan chief last year and hired a puppet in his stead.  The goal: inflation.  After disallowing all of the bad Japanese banks to just BK like they should have, Japanese leadership kept them alive leading to a no growth economy for decades.  Abe is determined to fix that meddling with more meddling. 

So far, the Japanese stock markets have responded positively to the new money printing.   So far.  And right now, things still look rosy to most people as if a new upward trend is in place since 2009 and particularly since the start of 2013.  But looking at the shapes of the waves suggests to me a different story is unfolding.  I see the crash down into 2009 as simply wave 1 of a larger bearish wave that I think is about ready to re-assert itself to the downside.  The recovery from 2002 was not 1-2-3-4-5 but rather clearly a-b-c.  And following that C wave, there appear to be 5 waves down which found a bottom in 2009.  Since then we again (so far) do not have 5 waves up.  So far, it looks like another a-b-c retracement and this seems to be losing steam right at the 61.8% fib despite record money printing by Japan.

Let's have a closer look at just the C of 2 wave which I model as still playing out.  This is far from confirmed yet but what I see in this C wave is that 1-3 is parallel to 2-4, that 2 was a sideways retracement while 4 was a vee retracement and that wave 5 looks to be finishing perhaps as a failed 5th via an ending diagonal.  In other words, it looks like the C of 2 wave is very nearly complete.  It looks like one more rail bump to the top should be expected with perhaps a throw over but then I expect it to reverse and come crashing back down through.  This will only be confirmed after a break below the lower channel but at least this model provides some triggers to look for.

I hate to talk about a whole country like this, especially one that has done so much for the world technology markets since her defeat in WW2.  But Japan is screwed.  It has the trifecta of death in aging demographics, unpayble debt to GDP ratio of well over 200 by Japan's own official numbers (and over 250% according to other sources) and a declining manufacturing base.  Japan used to own the automobile sector but now Toyota is fading in terms of price/performance/quality relative to newcomers like Kia.  Let's not even talk about the headwinds of Fukushima which will plague the country for at least the next 20+ years.




Abe is signaling that he knows money printing is not going to get the job done.  He thinks he needs a good war in order to stimulate the Japanese animal spirits.  He's beefing up Japan's military and making a public show of honoring Japan's WW2 war criminals in plain sight of China which was terribly abused by Japan's atrocious WW2 behavior.   He's begun a process of concentrating political power and of making everything secret.  Fascism is coming to Japan and the people will allow it because they will think they have no other hope.  The Japanese stock market will suffer the consequences.